DoorDash: Workers will get paid more, keep tips

By Andy Newman

Published
3:20 pm PDT, Friday, August 23, 2019

In the coming weeks, customers who order a meal via DoorDash, the nation’s biggest food-delivery app, will get something extra: a promise that when they tip, the money will go straight to the worker rather than into DoorDash’s pocket.

The company’s 1 million delivery workers will also get something else extra: an increase in minimum base pay.

The result, the company promised Thursday, will be that on average, the workers, known as Dashers, will make more money — though how much more remains unclear — and “on average” means that some Dashers will make more and others will make less on a particular order.

DoorDash has being widely criticized for its old pay model, in which customer tips effectively went to DoorDash rather than to the worker in many cases. Last month, after a New York Times article described the tip policy, the company said it would drop it.

The new system is being rolled out gradually and will be in place nationwide by the end of September, DoorDash CEO Tony Xu said in a phone call.

There is a catch for the workers, though: DoorDash’s old policy had the counterintuitive effect of insulating them against customers who left no tip or a small tip. Many Dashers liked it; some hated it.

Xu said that under the new policy, “there’s going to be greater variability” in earnings.

“If there’s two orders, and Dasher A had a $3 tip and Dasher B had a $6 tip, Dasher B will make $3 more,” Xu said.

But he said the company would engineer its payouts to make sure that workers make “meaningfully more” than they do now.

In the piecework world of delivery apps, like across much of the gig economy, workers are considered independent contractors and are not covered by minimum-wage laws, and the apps use complex and frequently changing methods to calculate pay. Deliverers typically juggle orders from competing apps and decide which ones to take on.

Under the new policy, DoorDash is increasing its base pay from $1 per order to at least $2, and often more, based on variables like the distance and difficulty of delivery. It will also run more “promotions” in which workers can make more during certain hours or in certain neighborhoods.

Xu also said that before accepting or rejecting an order, a Dasher will be shown the whole amount of the payout — base pay, bonus pay and any tip the customer added at checkout — as well as the pickup and delivery location.

Many delivery workers find such information crucial in deciding whether an order is worth doing, and many of DoorDash’s competitors do not show all of that information.

Uber Eats, for example, does not reveal where the food is being delivered to until after the courier picks it up, which often leads to an unpleasant surprise for the courier if the delivery address is far away.

Xu said that last year, the average DoorDash worker made $17.50 per hour, though delivery apps define an “hour” as time actually spent doing pickups and deliveries, not time spent waiting for orders to come in.

Here is how DoorDash’s old system worked: If DoorDash guaranteed a worker $7 for delivery and a customer did not tip, DoorDash would pay the worker the whole $7. If the customer tipped, say, $3 via the app, then DoorDash would pay the worker only $4, then add on the $3 tip so that the worker would still get just $7.

When customers learned of this system, it seemed to many of them that they were effectively tipping DoorDash rather than the person who brought them their food.

But DoorDash’s payouts on orders where customers did not tip were often higher than other apps’ payouts, which never included tips. As a result, many Dashers preferred DoorDash’s old system because they knew they would make a decent amount on a delivery, whether or not a customer tipped.

“We always tried to have the Dasher’s back,” Xu said.

DoorDash has more than 36% of the national market for meal delivery, 3 percentage points ahead of GrubHub, according to Second Measure, an analytics firm.

Under the new system, Xu said, DoorDash will hire a third party to track workers’ earnings — including tips — and let DoorDash know whether the workers are making more or less than they were making under the old system, and DoorDash will adjust its payouts accordingly. DoorDash would not disclose the name of the third-party firm.

Niels van Doorn, an assistant professor at the University of Amsterdam who studies working conditions for app couriers, said that DoorDash’s announcement didn’t provide enough detail to make it clear how much it will help the workers, though he called it a “step forward” that DoorDash will no longer use tips to subsidize payouts.

On a Reddit forum for DoorDash workers, r/doordash, reaction was also mixed.

“It’s almost guaranteed to be a big win for drivers, being able to cherry pick high tip orders is what made Grubhub so good for so long,” wrote a user posting as GTFOtheLeftLane.

“I don’t think I have too many expectations with this,” responded a user posting as rogeliana. “I just want to know how much I’ll be paid (meaning I’ll get no less than $X). As long as the minimums I’m used to being offered don’t get lower (and there’s a good shot at more) then I’m okay with it. I just don’t want it to be worse than it is now.”